According to the Adam Smith Institute, changes in the 1999 Employment Relations Act have helped to push up the price of insurance for all businesses.
...the 1999 Employment Relations Act increased the maximum compensation for unfair dismissal from £12,000 to £50,000. If discrimination was the reason for dismissal, there is now no cap at all.
These insurance claims have presumably been made on the back of dismissals the courts found unfair or discriminatory. At first blush therefore are these higher costs not the result of the employers own actions? Maybe the managers responsible should be personally surcharged as Councillors can be for actions which lead to costs for the council they represent? Or if that is too regulatory why not just sack them?
It may be of course that the ASI is really saying that employers should be able to hire and fire for any reason whatsoever without those fired having any remedy. If we accept this for the sake of argument, what would be the implications of such a radical approach?
First of all we need also to assume a completely free market in labour, with employers and employees able to seek whatever terms they wish and to negotiate with each other about those terms. It seems likely that employers would use agents to carry out the negotiations since the CEO of a company is not going to want to have to constantly negotiate with each and every worker directly. These agents would probably be directly employed since the work would be ongoing, although it presumably could be outsourced as is frequently the case with accounting services.
On the employee side they would presumably also want to employ someone to negotiate on their behalf. After all their normal working skills are unlikely to include the skills needed for negotiations, (although I suppose some workers could develop those skills over time and with extra training and may wish to move into this area, thus allowing for 'upskilling' in the labour force). Inevitably this will not be by direct employment, but through some form of agent. Over time, economies of scale and the workings of the market are likely to lead to these agents combining into larger units much as other businesses do. Some will be more successful than others and will therefore gain more business. Some may diversify into areas other than simple wage negotiations and into areas such as holidays, pension benefits etc.
Over time, relationships between employers and employees agents would begin to to stabilise into formal agreements, with contracts setting out terms of employment for a defined period.
Hang on - this is beginning to sound very familiar! Isn't this a trade union?
